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What can Atlantic Canada learn from Estonia? Here are four ideas…

Last week at AIMS we released our latest study, entitled “e-Government in the Atlantic Provinces: Review and Future trends”. The author, Jan Pavel, found that while there were some successes, Atlantic Canadian provinces generally lacked high-level online delivery of government services. North America in general is behind on e-government, and thus, the Atlantic Provinces have an opportunity to adopt higher levels of e-services as a regional competitive advantage.

One aspect of Pavel’s report to which I would like to draw attention is his comparison to Estonia. He uses the small European country as an exemplar. Why? Estonia is indeed a world leader in e-government, but e-government is a part of a broader entrepreneurial environment that has made Estonia a world leader in start-ups.

If small, resource-poor Estonia, living under the near constant threat of Russia can create a highly entrepreneurial culture, why can’t we? With that in mind, here are four ways in which Atlantic Canada can learn from Estonia:

Dealing with government should be as painless as possible: This theme is prevalent throughout Pavel’s paper. It applies to individuals as well as businesses. Who hasn’t spent hours frustrated in a government office waiting on a permit, driver’s licence, vehicle registration, or the like? All that wasted time has a cost. Government can be a complex machine, but dealing with basic government functions should be as simple as possible, and e-service delivery is a highly effective way to make it so.

Re-examine the tax system: Our tax system is needlessly complex. Many people and businesses don’t understand what they’re paying or why. Businesses and individuals are taxed from multiple angles at multiple rates. Estonia has been consistently ranked among the most tax-competitive countries in the world, owing to its simple and flat system of taxation. This undoubtedly aids its entrepreneurial environment. Further, Estonians can file their taxes online and receive a possible refund in mere minutes.

Entrepreneurial culture and political leadership: Political leaders need to signal to broader markets that they are open for business and friendly to entrepreneurship. Entrepreneurs thrive when in proximity to others. While the notion of an “entrepreneurial culture” is a soft, big picture idea, steps can be taken to make entry into the world of entrepreneurship easier. More opportunity for mentorship between new entrepreneurs and their more experienced counterparts would be a start.

Investment in R&D: Estonia spends more on Research and Development than both the EU and OECD averages. Recently Nova Scotia has seen hundreds of millions of federal dollars flow into post-secondary institutions for R&D. In fact, Nova Scotia has been commended for the public side of its R&D equation. However, private sector R&D has fallen behind. Eighty-five percent of Nova Scotia’s R&D spending is in the public sector. While there is lots of government money flowing, businesses aren’t investing private dollars in R&D. The One Nova Scotia report called for greater innovation strategy as a means of solving the R&D problem. That may be helpful, but we also need to consider our level of taxation. Most R&D spending in Nova Scotia is by Nova Scotia companies, with little from outside. When companies from other provinces (or countries) look for where to spend, they shop jurisdictions, and one of the first things they look at are tax rates. Discussing a flat tax means examining tax Here, we need to examine tax levels.